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Alan Mulally's Management Secret: Peer Accountability

With the retirement of Alan Mulally earlier this summer, Ford’s new CEO, Mark Fields, has a big set of shoes to fill. If he follows the lead of his predecessor and continues the management system that Mulally introduced, Fields is likely to take the automaker to even greater heights. In business, there are few things more powerful than a good management system. Fortunately for Fields, he has inherited a great management system.

When Mulally accepted the offer to become Ford’s chief executive in the summer of 2006, the carmaker was in the midst of a steady decline. Over the previous five years, Ford’s stock price had plummeted by more than half from more than $16 a share to less than $7. To solve its problems, Ford’s board of directors made what many auto insiders considered a bold move when they reached outside their industry and convinced Mulally to leave Boeing to become the carmaker’s new CEO. As the leader of Boeing’s Commercial Airplanes Group, Mulally had successfully taken on the formidable challenge from Europe’s Airbus Industrie by transforming the company into a lean and profitable enterprise. Ford’s board hoped Mulally would do the same for their ailing company.

The Problem is the System, Not the People

Upon assuming the leadership of Ford, Mulally brought a sense of focus that had been missing from the dysfunctional management team he inherited. Although his new board had given him carte blanche to revamp the leadership team, he advised them that he didn’t think he would need to replace many people. Mulally’s initial assessment of Ford’s failed management was that it was the system—and not the people—that was the problem. His solution was to use the peer accountability system that worked so well for him when he was at Boeing. At the heart of this system was a weekly leadership meeting he called the “business plan review” (BPR).

In these sessions, each member of the leadership team was expected to present a concise color-coded update of his or her progress toward meeting key company goals. Projects that are on track or ahead of schedule are colored green, yellow indicates the initiative has potential issues or concerns, and red denotes those programs that are behind schedule or off plan.

Initially, the leadership team resisted the BPR. They had important work to do and didn’t have time for these mandatory weekly sessions. They were used to working in their own fiefdoms, where their authority was unquestioned and they were in total control. Their notion of an effective leadership team was each individual leader doing his or her own thing and doing it well. In the old system, they kept to themselves and stayed out of each other’s way. And when Ford’s leadership team did gather together, they behaved more like fierce competitors than skilled collaborators. Mulally’s expectation that they would come together for weekly sessions where they would provide candid reports and be accountable to each other seemed like a crazy idea and a sure path to the unemployment line. It was not surprising that in those first BPR meetings, everyone on the leadership team reported everything as green.

The Breakthrough

One of the leaders who saw no value in the BPR was Fields, who protested to Mulally that he needed to keep focused on his business unit. Fields saw these meetings as a wasteful distraction from his real work. Mulally remained firm in his resolve to introduce the BPR, asking Fields to trust the process.

In his book, American Icon, Bryce G. Hoffman relates the story of how Fields unwittingly provided the breakthrough that broke the resistance of the leadership team to the BPR process. Fields had been the obvious internal candidate for the CEO job when the automaker recruited Mulally, and given Ford’s culture of fierce competitors, Fields was sure that it was just a matter of time before Mulally nudged out his main internal rival. So, he decided if he was going to lose his job, he might as well go out "in a blaze of glory." Fields’ unit had been working on a project that was in serious trouble, and he decided at the next BPR meeting, he would color it red. He stunned his colleagues when he made this bold—what some in the room thought was a career ending—move. But, it delighted Mulally, who seized upon the moment to engage the whole leadership team on how they could collaborate together to solve the business issue Fields shared with the group.

Mulally understood that the prime lever of an effective organization is a highly collaborative senior leadership team. Without this lever, it’s very difficult, if not impossible, to have a collaborative organization. He was determined to transform Ford’s team of rivals into a team of collaborators. Fields bold move helped make that a reality.

Building Shared Understanding Means Spending Quality Time Together

Color-coded status reports provide a level of transparency that is sometimes absent from the usual numerical reports, and processing these visual updates as a team instills a discipline of peer accountability that is often lacking in leadership teams. The cadence of frequently gathering the whole team in one place to review all key initiatives helps create a shared understanding about the most important issues of the business. But more importantly, as happened in the case of Ford, it provides critical opportunities for the team members to synchronize their activities to help create extraordinary performance.

Mulally was adamant about the BPR process because he understood that the key dynamic for building a highly effective team is not a one-time offsite team-building event, but rather a frequent cadence where everyone on the team gathers in the same place at the same time for crucial business conversations. The quality of a team is dependent upon the quality of the conversation, and that means taking the time to build a shared understanding of the business by spending quality time together.

In implementing this practice, Mulally was very careful to maintain an environment where it was safe to candidly report the actual status of key activities. Mulally impressed upon the team that there was no value in status meetings where everyone reports that all is well—even when things are not—because people are more concerned with maintaining an image than dealing with reality. When members of a team have a process where they feel that they are accountable to each other and it is safe to tell the truth about the actual state of their projects, they provide themselves with the opportunities to assist each other to more quickly resolve critical issues when they occur. The primary purpose of peer accountability is not to create more pressure for individual performance but rather to identify opportunities for the team to leverage its collective strength. That’s the fundamental dynamic that defines a great management system.

Rod has more than 30 years of experience in management positions of increasing responsibility in the healthcare industry. Rod is an innovative executive leader with sustained success in achieving financial, operational, and market growth objectives in challenging environments. He has extensive experience in serving as a catalyst for positive change and in building highly collaborative organizations.